The ASX endured its worst one-day performance in seven months on Monday, with the losses extending into Tuesday.
Photograph: Bloomberg/Bloomberg via Getty Images

Australia’s sharemarket has hit a four-month low as fears of the escalating US-China trade war grew and the International Monetary Fund warned that the country’s strong economic growth will peak thanks to rising protectionism.

Heavy losses in local bank and health stocks also dragged the market down on Tuesday with little respite in sight on Wednesday.

The ASX200 – which tracks the 200 biggest publicly-listed companies in Australia – has lost 2.25% in value since Friday, having endured its worst one-day performance in seven months on Monday, with the losses extending into Tuesday.

The benchmark S&P/ASX200 closed on 6,041 points, down from 6,100.3 points on Monday. It is now sitting 24 points lower than at the start of the year with Wednesday’s session expected to see the benchmarket index fall further.

Analysts say there are multiple reasons why the share market is suffering broad-based declines recently, including rising global trade tensions, falling commodity prices and concerns about the banking royal commission.

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Australia’s economy would grow 3.2% this year, it said, before slipping to 2.8% next year in numbers that “partially reflect the negative effect” of the trade measures.

Only three months ago, the IMF had been projecting the global economy would grow at an annual rate of 3.9% this year and next, but it cut that projection to 3.7% for both years.

IMF officials said Donald Trump’s trade war with China and Europe would likely hit global growth and reverberate through 2019. The escalation of the US president’s protectionist policies, which had resulted in the world’s largest economy doubling import duties on some Chinese goods, would negatively affect the growth of the world’s largest trading countries, including the US, France, Germany and China.

“Escalating trade tensions and the potential shift away from a multilateral, rules-based trading system are key threats to the global outlook,” it said. “An intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade.”

The IMF said that even without a further deterioration in US and China relations, the global economy would grow this year at 3.7% and at the same rate in 2019 compared with the 3.9% it predicted in April.

On Tuesday, Australia’s share market was also weighed down by health and bank stocks.

After Commonwealth Bank announced plans to investigate advice fees it had charged dead customers – a controversy exposed in the banking royal commission – and pledged to rebate $20m worth of grandfathered commissions to customers, CBA shares lost 0.87%.

Cochlear lost a further 5.2% in value, closing at $191.88 a share, on news that Bose had invented a hearing aid that patients can control with a smartphone. CSL shed 4.5% to close at $188.21 a share, its lowest since mid-June.

The Australian dollar has weakened from US80.9c in January to roughly US70.77c this week. But it recovered some ground on Tuesday by rising to just above US71c.